Profit a prendre in forest produce contract bars sales tax on amounts payable under the arrangement.

A forest contract allowing the contractor to collect, remove and dispose of tamarind from specified forest areas was treated as a grant of a profit a prendre, not a sale of goods. The court applied the principle that the true nature of an agreement depends on its terms and legal effect, noting that payment was in fixed instalments regardless of actual collection and no remission or compensation was available if collection was reduced or prevented. Because the arrangement conferred a right to appropriate produce arising out of land, sales tax could not lawfully be levied or retained on amounts payable under the contract.

---

---

Issues: Whether the forest contract permitting the contractor to collect, remove and dispose of tamarind from specified forest areas was a sale transaction or a grant of a profit a prendre, and whether sales tax could be levied and retained on amounts paid under such contract.

Analysis: The agreement and its conditions showed that the consideration was payable in fixed instalments irrespective of the quantity of tamarind actually collected, and that the contractor had no right to remission or compensation if collection was prevented or reduced. The substance of the arrangement was therefore a conferment of a right over the forest land with a right to appropriate the produce, rather than a sale of goods. Applying the principle that the true nature of a document must be gathered from its terms and legal effect, the contract was held to be a grant of a profit a prendre, namely a benefit arising out of land. Since such an interest is not a sale of goods, the State authorities had no authority to levy sales tax on the amounts payable under the contract.

Conclusion: The contract was not a sale but a grant of a profit a prendre, and the collection of sales tax was without authority of law.

---